Featured Image from Tesla site
Imagine the following world. There is no air pollution. All transportation makes no noise. Homes don’t have natural gas stoves, water heaters, or furnaces. Everyone in the world has sufficient energy, clean water, food, and work. Natural disasters are reduced in intensity and how often they occur. Women and minorities are equally represented in companies and governments around the world, from the highest to the lowest levels. How much better would the world be?
Investopedia defines ESG (Environmental, Social, and Governance) criteria as the following:
Environmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. Investopedia
Perhaps you have heard of wunderkind company Tesla? I’m sure you have. Recently, Tesla’s market cap became larger than the next 9 largest auto companies, in the whole world. I’m not here to argue about Tesla’s valuation. Tesla is one of the most valuable and well known of ESG companies. I’m here to point you to the trend investments in ESG companies will only accelerate over the coming 10 years. Consider the impact of ESG companies as you look at investing your future earnings, looking for places to work, or creating businesses to solve some of the challenges we have as a civilization. BlackRock has made climate change central to their investment strategy in 2021. They manage $7 trillion in assets or ($7,000,000,000,000). They are the world’s largest investor. This is becoming a mainstream idea.
There are four main purposes of this blog:
- Show how you can live sustainably, whether you own your home or rent
- Purchase sustainable products and services
- Invest in ESG companies
- Spread the benefits of what you know to other people unaware of sustainability and ESG efforts
Points three and four are what I will be talking about today. Let’s look at some of the areas ESG investments are gaining momentum. Note, I recently had investments in Tesla and Nio. This is not investment advice, or a call to purchase any securities. Please do your own due diligence before making any investments. Here are my top 10 areas for ESG growth in the coming decades.
- Electric vehicles – Without question, Tesla is the king in this area in terms of marketing and production. Their push to create iconic passenger electric vehicles has motivated other auto and battery manufacturers to follow suit. Electric vehicles are a broad area, with passenger electric vehicles, commercial electric vans, waste trucks, and even Class 8 semi trucks undergoing electrification. I started listing all the companies, and they were too many to list. Many companies have used Special Purpose Acquisition Companies (SPAC) to go public this year. Think of them as blank check companies, looking for a place to invest.
- Batteries – Large scale production of electric vehicles can’t take place without the large scale mineral mining and production of batteries. Tesla is working on scaling their simplified 4680 form factor cells and creating new battery factories in Austin, Berlin, and Shanghai. Companies like QuantumScape are working on solid state batteries, that will reduce vehicle costs, reduce weight, increase safety, and increase performance. One of my fellow Cleantechnica writers recently interviewed the CEO of QuantumScape, Jagdeep Singh. The industry is moving away from artisanal cobalt mining, and away from cobalt altogether. Cobalt mining is fraught with social and governance risk, due to child labor for mining the cobalt in Congo. Battery research is broad, with batteries for electric vehicles, residential stationary batteries, and commercial and utility scale batteries getting lots of love. Companies are investing in cranes and concrete blocks powered by renewable energy. They drop the blocks on demand by gravity and use it to generate electricity. What an idea, huh?
- Robotaxis – I almost forgot about about robotaxis. Robotaxis are of major interest as ridesharing, drone delivery services and long haul trucking. Robotaxis will most likely be based on an electric vehicle and battery architecture. Tesla is working on their FSD solution, with Autosteer being able to navigate left turns, right turns, and roundabouts. Think of a world where people only own cars for long distance trips, camping, surfing, skiing, places without adequate EV charging, or specialty needs. The rest of us will take a robotaxi to work or go shopping, and save on car payments, insurance, fueling charges, and maintenance. This is an area of immense interest, and difficult to achieve and scale.
- Wind, Water, and Solar – Each of the three areas deserves its own section. Recent research has shown that the entire world can be 100% powered by wind, hydroelectric, and solar power. A fraction of the earth’s land mass would be sufficient. The growth in each of these areas shows wind and solar are competitive with new natural gas, coal, and nuclear power plants. Progress is accelerating and soon wind and solar will be cheaper than existing natural gas, coal, and nuclear power plants. Many existing power plants are located in minority communities, where people are constantly exposed to plant pollution. There is offshore wind, floating solar, solar roof tiles, and water from lakes can be used as a form of pumped, long term storage.
- Organic and non-gmo food – The modern agricultural complex uses chemical fertilizers, pesticides, and heavy doses of antibiotics to treat food. These waste products seep into our water supply, pollute our oceans, and soak into the land. Organic food must avoid all of the above and they can not be genetically modified. Warehouses are being created to raise crops indoors with renewable energy. Sundrop Farms is using concentrated solar power to grow tomatoes in the Australian desert. Crops in the desert! Sustainable ocean fisheries are setting up protected pens to prevent over fishing. We all live on the same planet. Our cumulative choices have wide impacts.
- Synbio – Synbio is short for synthetic biology. Impossible Foods and Beyond Meat are two leading examples to re-create the texture, flavor, and nutrients of animal protein. Cattle is one of the main reasons rainforests are destroyed and a leading cause of human emissions. It takes one 100 pounds of corn and gallons of water to help a cow gain one pound of meat. If we can recreate the meat in the lab, it will take far less resources and have a far smaller impact on the environment.
- Appliances – The renewable future will need all-electric appliances. Natural gas stoves will need to be replaced with electric / induction stoves. Hot water heaters will need to be replaced with hybrid heat pump water heaters. Heating furnaces, AC units, and refrigerators will be physically closer together to take advantage of heat pumps and how they work.
- Energy efficiency – Existing buildings will need to be retrofitted with the latest in renewable energy technology, insulation, and weatherproofing. Simple changes such as switching to LED lights, low flow water fixtures, shower heads, and toilets, better windows and hybrid heat pump water heaters will make a big difference on energy and water usage.
- Design – New homes, apartments and commercial buildings need to be re-designed to incorporate sustainable technologies from the beginning, not as an after thought. Fresh air, green spaces, solar, energy efficiency, and the best in building and landscape design need to come together to address future needs.
- Women and minority owned businesses – If you are thinking most of the above list is focused on Environmental needs, you would be correct. Perhaps the most important item of all is a renewed focus on women and minority owned businesses, efforts focused on diversity and inclusion, addressing the Social and Governance criteria in ESG. Companies and countries that better help women and minorities gain opportunities will have better economies, better mental and physical health, higher quality ideas, and greater levels of innovation. This is a major opportunity enabled by the move to sustainable economies, to start fresh and give underrepresented populations a chance.
We should all be thankful for Tesla leading the way and highlighting ESG criteria and companies. As we can see, there are varied opportunities to sustainably invest and flourish. A lot of change will be coming over the next 50 years. Avoid areas that will shrink, and invest in themes with a bright future.
“The future belongs to those who believe in the beauty of their dreams.” Eleanor Roosevelt
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